SB 1137 California Senate · 2025-2026 Regular Session

Personal income tax: deduction: medical expenses.

Summary

The Personal Income Tax Law, in conformity or modified conformity with federal income tax laws, allows various deductions in computing the income that is subject to the taxes imposed by that law, including a deduction for the medical and dental expenses paid during the taxable year, not compensated for by insurance or otherwise, for the medical or dental care of the taxpayer, spouse, or a dependent, to the extent that such expenses exceed 7.5% of federal adjusted gross income. This bill would, for taxable years beginning on or after January 1, 2026, and before January 1, 2031, allow a deduction from adjusted gross income for the costs of medical care, as defined, of a qualified taxpayer to the extent the costs exceed 4% of the qualified taxpayer's federal adjusted gross income. The bill would limit the deduction to $5,000. The bill would define "qualified taxpayer" for this purpose to mean an individual with adjusted gross income that does not exceed 300% of the federal poverty level and who does not take an itemized deduction for costs of medical care pursuant to the above-referenced provisions on their California income tax return. Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements. This bill also would include additional information required for any bill authorizing a new tax expenditure. This bill would take effect immediately as a tax levy.

Bill status in committee 1 of 4 stages cleared

Introduction

Feb 2026

Committee Review

Floor Vote

Governor

Introduced Feb 18, 2026 Last action May 14, 2026

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What changed between versions

02/18/26 - Introduced → 04/08/26 - Amended Senate · 6 edits · Apr 8, 2026

MODERATE

The Senate amendment significantly expands SB 1137 beyond its original scope of simply lowering the medical expense deduction threshold from 7.5% to 4% of AGI. It adds a new Section 17242 creating a separate above-the-line deduction capped at $5,000 for lower-income taxpayers (AGI at or below 300% of the federal poverty level) who do not itemize medical expenses, effective for tax years 2026 through 2030. The amendment also adds coauthors from both chambers and restructures the findings and performance indicators sections to cover the new deduction.

Scope change

The bill's scope expanded from a single change (lowering the itemized medical expense threshold from 7.5% to 4% of AGI for all taxpayers) to a two-part measure that also creates a new targeted above-the-line deduction for lower-income non-itemizers, with an income cap at 300% of the federal poverty level and a $5,000 maximum deduction amount.

SCOPE

New Section 17242 creates a separate above-the-line deduction for medical care costs exceeding 4% of federal AGI, capped at $5,000, available only to 'qualified taxpayers' (individuals with AGI at or below 300% of the federal poverty level who do not itemize medical expenses on their California return). The deduction applies to taxable years beginning on or after January 1, 2026 and before January 1, 2031, and is repealed December 1, 2031.

The findings and declarations section is restructured to specifically address the new Section 17242 deduction rather than just the threshold change in Section 17241. Performance indicators now reference changes in taxpayers receiving the Section 17242 deduction compared to those taking the federal medical expense deduction on their California returns.

DEFINITION

Defines 'qualified taxpayer' as an individual whose AGI does not exceed 300% of the federal poverty level (as determined by the U.S. Census Bureau) AND who does not take an itemized deduction for medical care under Section 213 of the Internal Revenue Code on their California income tax return.

REQUIREMENT

Amends Section 17072 to modify the conformity with federal law so that the new Section 17242 deduction is allowed in determining adjusted gross income, making it an above-the-line deduction rather than an itemized one.

ENFORCEMENT

The Franchise Tax Board report requirement (due February 1, 2030) now explicitly states that its disclosure provisions are treated as an exception to Section 19542 of the Revenue and Taxation Code, clarifying the legal basis for the data collection.

TECHNICAL

Coauthors added: Senators Alvarado-Gil, Choi, and Strickland; Assembly Members Alanis, Lackey, Macedo, and Tangipa.

Floor votes

How they voted

No floor votes recorded yet.

Full legislative history

Actions timeline

Total actions

Key actions

Committee

Amendments

May 14, 2026

Upper · Passed

May 14 hearing: Held in committee and under submission.

upper

May 6, 2026

Upper · Passed

From committee: Do pass and re-refer to Com. on APPR. (Ayes 5. Noes 0. Page 4154.) (May 6). Re-referred to Com. on APPR.

upper

Apr 8, 2026

Upper · Passed

From committee with author's amendments. Read second time and amended. Re-referred to Com. on REV. & TAX.

upper

Feb 26, 2026

Committee

Referred to Com. on REV. & TAX.

upper

Feb 18, 2026

Introduced

Introduced. Read first time. To Com. on RLS. for assignment. To print.

upper

1 primary · 7 co-sponsors